Output from a process contains 0.01 proportion of defective units. Defective units that go undetected into final assemblies cost $26 each to replace. An inspection process, which would detect and remove all defectives, can be established to test these units. The inspector, who can test 21 units per hour (which matches the current production rate), would be paid $9 per hour, including fringe benefits. Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether or not the inspection operation is added.
a-1. Without the inspector, what is the current hourly cost of defects? (Round your answer to 2 decimal places.)
a-2. Should an inspection station be established to test all units based on costs alone?
Yes or No?
a-3. If the inspection operation is added, what would be the cost to inspect each unit? (Round your answer to 2 decimal places.)
b. What would be the benefit (or loss) from establishing the inspection process? (Input the amount as a positive value. Round your answer to 2 decimal places.)
(Benefit or Loss) of _______per unit